The cost to overdraw a bank account could drop to as little as $3 under a proposal announced by the White House, the latest effort by the Biden administration to combat fees it says pose an unnecessary burden on American consumers, particularly those living paycheck to paycheck.
The change could potentially eliminate billions of dollars in fee revenue for the nation’s biggest banks, which were gearing up for a battle even before Wednesday’s announcement. Exactly how much revenue depends on which version of the new regulation is adopted.
Banks charge a customer an overdraft fee if their bank account balance falls below zero. Overdraft started as a courtesy offered to some customers when paper checks used to take days to clear, but proliferated thanks to the growing popularity of debit cards.
That’s what got me at my old bank. Something went wrong with my paycheck one month so I tried to move stuff from savings to cover bills. Then Netflix, Spotify, and Hulu all came out along with my electric bill. But the bank didn’t support instant savings transfers and took a couple days to transfer the funds.
I ended up with ~$100 in overdraft fees while transferring about $2000 to checking, and the electric bill overdrafted while my energy company showed there was an error and flagged my account. When an error happens twice in a year, that company forces you to pay bills in person via cash, check, or money order only. Left my bank for another and haven’t had another issue since.
In case you, or others run into this in the future, know that cash (at almost every bank) posts to your checking account immediately. So for our situation if you were able to go back time and do this again, go into the bank and do a cash withdraw from savings, get the cash in hand, then hand it right back to them as a cash deposit to checking.
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